Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Are Apple, Tesla, and Bitcoin Entering Market Technical Excess Top Phase? - 18th May 21
Gold Watch Out as Price May Be Staging New Momentum Base In Preparation For A Big Move Upwards - 18th May 21
Why the Demand for US Real Estate Licenses May Soon Fall into a Sinkhole - 18th May 21
Semiconductor Equipment Maker ASML Is at the Center of the Global Chip Shortage - 18th May 21
Could This Be The Hottest Investment Sector For 2021? - 18th May 21
TESLA Tech Stock Bubble BURSTS! Stock Price Heading for CRASH to below $400 - 18th May 21
The Most Exciting Biotech Stock Of The Year? - 17th May 21
Gold Mining Stocks Fundamentals - 17th May 21
Junior Gold Miners Should be Rallying – What’s Holding Them Back? - 17th May 21
Stock Market - Should You Be In Cash Right Now? - 17th May 21
Learning the Financial Markets - 17th May 21
INVESTING IN HIGH RISK TECH STOCKS - ALL OR NOTHING - 16th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trump’s Agenda Stacks the Odds in Gold’s Favor

Commodities / Gold and Silver 2016 Nov 18, 2016 - 04:51 PM GMT

By: John_Mauldin

Commodities

"It's the economy, stupid."

This was the catch-phrase Bill Clinton’s campaign used in 1992 to help defeat George H.W. Bush. In this year’s presidential race, the slogan “Make America Great Again” branded the Trump campaign as a referendum against the economic policies of the current administration.

No matter the race—be it in local or national politics—the economy plays a crucial role in determining whether the incumbent party will retain office or relinquish it to another group.


On Election Day, America voted for change amid years of tepid economic growth and declining wage growth. 

Whether Donald Trump can ignite faster economic growth and bring more well-paying jobs to American soil is the $64,000 question.

What does seem certain is his anticipated route to make it happen: more debt and deficit spending.

Based on financial market reactions in the days following the election, this may be easier said than done—especially since US government debt has increased by 150% since 2006 to over $20 trillion dollars.

Promise of increased spending already affecting markets

Given its duration, the 30-year bond is one of the best predictors of changes in inflation expectations and the direction of overall interest rate structure.

Since the election, the potential for greater spending and accelerating inflation has spiked 30-year Treasury bond yields 15%.

US 30-year Treasury Bond Yield

While inflation at the consumer level has been relatively non-existent since the financial crisis of 2008/2009, extremely accommodative Fed policy has hugely benefitted other assets.

Specially, values of US stocks are at record levels and real estate has reached or exceeded levels not seen since the mid-2000s in many parts of the country.

But as seen below, inflation has started to tick up in the US and other major economies. This is occurring at the same time economic growth is stalling.

It’s a precarious combination—even more so considering the Federal Reserve’s plan to increase the interest rate next month, and again in 2017. 

The re-emergence of stagflation        

The Trump administration’s ambitious agenda in the current economic climate has the distinct possibility of triggering inflationary forces, ultimately resulting in stagflation.

Stagflation is a combination of low economic growth in the presence of rising prices and under employment. Necessities like food, fuel, and electricity will increase in cost and assets like real estate and stocks will decline.

While the employment picture has improved since the financial crisis, the quality and types of jobs being added are questionable—as indicated by wage data and labor force participation rate. 

Jobs, specifically manufacturing jobs, were a big pillar of Trump’s campaign and will undoubtedly be one of his major initiatives after taking office.

Even if he’s successful in creating jobs, it will take a significant amount of time before the effects have an impact on economic growth and government revenue. And to make this and many of his other plans come to fruition—building a wall on the Mexican border, increasing immigration efforts, and improving infrastructure such as airports and bridges—it will require debt and most likely, higher borrowing costs. 

As you can see in the chart above, the US dollar is still viewed as the strongest global currency, and this has become even more pronounced recently. But its strength could prove to be a double-edged sword as exports become more expensive and additional debt service by foreign holders will be difficult as their currencies depreciate.

Recent history shows stagflation buoys gold

During the 1970s period of stagflation, gold experienced a significant rally. In fact, it tripled in price from 1972 to 1974. It tripled again at the end of the decade.

The cause of the coming stagflation may be different this time around, but the result could very well be the same. Gold’s recent correction is an opportunity to get positioned with an initial allocation or make an additional investment—before prices really begin to soar.

Gold is poised to be a major beneficiary of this administration’s agenda and its potentially inflationary agenda.

To put this in perspective, the last period of significant stagflation coincided with gold’s move to $850/oz. in January 1980. Adjusted for inflation, this would equate to $2,500/oz. in current dollars.

With massive uncertainty and abrupt fiscal policy changes likely, now is the time get positioned into physical precious metals.

Free Ebook: Investing in Precious Metals 101: How to buy and store physical gold and silver

Download Investing in Precious Metals 101 for everything you need to know before buying gold and silver. Learn how to make asset correlation work for you, how to buy metal (plus how much you need), and which type of gold makes for the safest investment. You’ll also get tips for finding a dealer you can trust and discover what professional storage offers that the banking system can’t. It’s the definitive guide for investors new to the precious metals market. Get it now.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in